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Report · August 2004

The Emerging Integration of the California-Mexico Economies

Howard J. Shatz and Luis Felipe López-Calva

This volume examines the many ways in which California and Mexico are integrating, focusing in particular on trade and foreign direct investment.

Trade links between Mexico and California are deep, in the sense that the total value of traded goods is high, and broad, in the sense that many different types of goods are traded. California exports to Mexico are more diverse across product classes than California exports to the rest of the world. In addition, they embody less skill than do California exports to the rest of the world, implying that trade with Mexico has provided greater opportunity to production workers than has trade with the rest of the world. Between 2000 and 2002, more than 200,000 California workers each year produced exports to Mexico — 17 percent of all export-related jobs in the state.

Foreign direct investment (FDI) between California and Mexico a that is, cross-border investment used to establish or control a business — has also increased dramatically in recent years. Many Mexican-owned subsidiaries in California are in wholesale and retail trade, whereas 55 percent of California-owned subsidiaries in Mexico are in the manufacturing sector.

In addition to their analysis, the authors suggest a number of policy options that might further the economic integration of Mexico and California. They also note that whatever policies the state chooses, devoting more attention to the border area is a worthwhile starting point because the infrastructure of this region is so strongly affected by ” and so strongly affects ” the economic interaction of California and Mexico.


Economic Growth Economy